Recent extreme fluctuations on international stock markets created a lot of media. It is often asked whether turbulence like this affects the local real estate market and it is a good question. The answer appears to be no. Our real estate market has started 2016 exactly as it finished off in 2015, buoyant, optimistic and very busy.
Australian’s property investments remain strong
The reason appears to be because the two markets are relatively disconnected, according to the Australian Bureau of Statistics. In essence Australians hold only around 3% of their wealth in shares and 60% in property. We love property and it has made many Australians wealthy and right now because bank interest is so low and the stock market looks so uncertain, more and more people are choosing to park their wealth in property in our part of the world. For the record a further 14% of Australian’s wealth is placed in superannuation funds (some of which is also in property) and 4% in bank deposits.
In addition to our historical predisposition to invest in bricks and mortar the real estate markets in our region are being boosted right now by the increase in rental yields because of diminishing supply in permanent rental stock.
Factors like strong growth of AIRBNB have meant that many more properties are being let short-term now when compared to just a few years ago.
Rental properties in short supply equals increased yields
There has also been little construction of rental accommodation in the last two decades. Put simply, all these factors are putting pressure on the supply of rental properties therefore resulting in higher rents and bigger yields…a classic case of “supply and demand”.
What does this all mean? 2016 looks like being another strong year for property in our region.
* Credit to the Byron Bay First National Real Estate Agency newsletter for this article.